World Economy

More Rich Asian Investors Turning to Private Banks

More Rich Asian Investors Turning to Private BanksMore Rich Asian Investors Turning to Private Banks

More rich Asians are asking private banks to manage their wealth amid increasing volatility in financial markets, a new survey shows, in an encouraging sign to firms such as UBS Group AG and Credit Suisse Group AG that are expanding their businesses in the region.

About a quarter of high-net-worth investors in Asia were clients of private banks as of May, up from 10% three years ago, according to the study released this week by Singapore-based East & Partners Asia Pte. The proportion of those managing their own wealth dropped to 52% from 70% in the same period, Bloomberg reported.

That trend is set to continue, as Britain’s vote to leave the European Union, uncertainties over the US and Chinese economies and currency volatility prompt more investors to seek professional advice, East & Partners analyst Jonathan Chng said. The firm is projecting almost 30% of wealthy Asians to become private-bank clients by next May, while those managing their own assets will fall to 47%.

“Primarily due to the constant changes in the global economy and heightened market uncertainties, HNWIs clearly understand that professional advice is necessary for wealth accumulation and protection,” Chng said in an e-mailed reply to questions, using the term that refers to high-net-worth individuals.

The trend portends well for UBS and Credit Suisse as they focus on bolstering their wealth management businesses in Asia. UBS is seeking to double its staff in China over five years, as it adds about 600 people in areas from wealth management to investment banking. Meanwhile, Credit Suisse plans to raise its client-adviser numbers in the Asia-Pacific region to about 800 by 2018, from 615 earlier this year.

Wealth Outlook

Private wealth in the Asia-Pacific region surpassed that of North America for the first time in 2015, thanks to stronger economies and real estate markets, according to a Cap Gemini SA report published in June.

“Asia’s wealth outlook remains more positive than pretty much any other part of the world,” Fabrizio Campelli, Deutsche Bank AG’s global wealth-management head, said in an interview last week in Singapore. The build-up in client assets “will be particularly strong in this part of the world,” he said.

The German lender is increasing headcount in Asia, as well as investing in technology infrastructure and compliance, Campelli said. The bank will add 25 relationship managers annually in Hong Kong and Singapore over the next five years, Asia-Pacific wealth management head Ravi Raju said last month.

The East & Partners survey shows that real estate remains rich Asians’ favorite investment, representing some 32% of their asset allocations, followed by equities, alternative asset classes and fixed income. However, the proportion for property has declined from 40% in 2013 as investors sought more international equities and alternative assets, the study shows.

The firm surveys more than 900 wealthy people in China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand twice a year on their investment trends.

Banks and other financial institutions are caught in a rising interest rate environment, while corporates are experiencing something of a pinch in the availability of working capital funding, the survey said.

With accelerating innovation in the finance industry and the disruptive impacts coming from the “fintech” sector, treasurers are sensing that alternative solutions are imminent but remain cautious about embracing them wholesale.

Eight in ten corporates in Asia cite “value for money” as the number one reason they are switching providers.

HSBC maintains its ‘mind share’ lead with one in three corporates recalling the bank as a provider of e-banking services.

“As the regulatory environment across Asia further enables new entrants to flourish, banks will be expected to keep transforming their products in order to retain their corporate customers and hold new and existing competitors away," Chng said.